Scottish Court of Session Decisions

This is an appeal against a decision of the Employment Appeal Tribunal dated 8 May 1998, refusing an appeal against a decision of the Industrial Tribunal in Edinburgh dated 14 January 1997. The hearing before the appeal tribunal was held on 12 August 1996. The only point now in issue relates to construction of section 123 of the Employment Rights Act 1996, and in particular to treatment of a payment made by the respondents in lieu of notice following dismissal by them of the appellant in determining the appropriate amount of compensatory award to be paid to the appellant in circumstances in which it was held by the tribunal that the appellant had been unfairly dismissed by the respondents but that the appellant had contributed to his dismissal.

Section 123 of the Employment Rights Act 1996 is in the following terms:

It may be noted that this section repeats amended provisions of the Employment Protection (Consolidation) Act 1978 section 74 and has thus been part of employment law for more than 20 years. Nevertheless, it is clear that the terms of section 123 fail to provide any clear basis for making the calculation required in the present case, although we understand that the need for such calculation is common.

The problem which arises is this. The appellant was dismissed by the respondents on 17 January 1996 following a lengthy period of absence from work, which has been accepted by the respondents as medically justified, and by his failure to comply with absence procedure after a warning of possible dismissal upon any such breach. The tribunal's decision that the appellant's dismissal was unfair and their further decision, in terms of section 123(6) of the 1996 Act, that he contributed to his dismissal to an extent whereby the compensatory award should be reduced by 75%, are no longer in issue. Accordingly, it is unnecessary to elaborate upon the circumstances in which the appellant came to be dismissed. Following his dismissal, the respondents paid the appellant £2,414.88 by way of payment in lieu of notice. We are told that this comprised eight weeks' wages. It was agreed before the tribunal that the appellant was entitled to a basic award of £1,890. By way of compensatory award, the tribunal found that he had been unemployed for 28 weeks and his net wage loss to 12 August 1996 was accordingly £5,578.44 (28 x £199.23). They also awarded him 13 weeks continuing loss of £2,589.99 (13 x £199.23) as he had made genuine but unsuccessful efforts to find alternative employment. They then applied the 75% reduction to the basic award of £1,890 and the total of £8,168.43 referable to compensatory award. This gave a figure of £2,514.61. They then deducted the £2,414.88 which had been paid by the respondents to the appellant in lieu of notice, leaving a net award of £99.73, which sum they ordered the respondents to pay to the appellant.

On appeal to the appeal tribunal, the appellant submitted that the reduction in respect of payment in lieu of notice should have been made before, and not after, application of the 75% deduction made in terms of section 123(6). In their reasoned decision upon this point the appeal tribunal refused the appellant's appeal. However, they did so on grounds advanced for the respondents before them but now abandoned by Mr. Napier, on behalf of the respondents, in the present appeal. Accordingly, it is inappropriate for us to express a view on the basis of the appeal tribunal's method of calculation of their award and their acceptance of that basis, where no support for that basis is now advanced. In particular, having regard to the position adopted by Mr. Napier on behalf of the respondents in the present appeal, we find it inappropriate to rehearse, and reach any concluded view upon, the detailed submission made by Mr. Peoples, for the appellant, in support of his submission that, as a matter of law and in particular as a matter of construction of section 123, the tribunal was bound to make the deduction for payment in lieu of notice before application of the 75% deduction in terms of section 123(6). This is because Mr. Napier effectively conceded that, if a particular construction to be advanced by him could not be derived from the terms of section 123, the appeal must be allowed. He did formally state that, failing acceptance of that construction, the decision of the tribunal, affirmed by the appeal tribunal, could be justified on the broad ground of what is just and equitable, in terms of section 123(1). In the event, we did not understand him to be advancing any substantive submission on this fallback position and we regard the respondents' position as relying on the construction advanced by Mr. Napier, which had not previously been advanced in relation to this application.

The construction of section 123 advanced by Mr. Napier involves acceptance that the deduction appropriate in respect of payment made in lieu of notice must be made, in terms of section 123, before the reduction decided upon in terms of section 123(6). As we have already indicated that concession makes it inappropriate for us to comment upon opinions expressed in cases cited by Mr. Peoples in connection with that matter. Having made that concession, Mr. Napier submitted that the appropriate way in which to deal with a situation such as the present was for the appeal tribunal to apply in terms of section 123(6) such proportion by way of reduction as would produce the same result as would be obtained if it were permissible to make full deduction of the payment in lieu of notice after applying the reduction appropriate in terms of section 123(6) to the net compensatory award appropriate if the payment in lieu of notice was ignored. Mr. Napier was unable to say what the section 123(6) proportionate reduction would be in the present case on the basis of the calculation now advanced by him but he said that this could be calculated. Indeed, we find that on doing this exercise the reduction in terms of section 123(6) would require to be a "proportion" of approximately 98.6052%, a result which we cannot reconcile with the wording of section 123(6), method of calculation apart. Suffice it to say that we can find in the terms of section 123 no warrant whatsoever for the method of calculation now advanced by Mr. Napier. This being so, we regard the presentation of the position of the respondents in this particular appeal as resulting in the concession that the appeal must be allowed. Accordingly, we allow the appeal. Parties are agreed that in this event there should be no remit and that the appellant is entitled to a sum of £1,910.89, with interest at 8% per annum from 25 February 1997, which we so hold.